How Do Dispensaries Pay Their Employees? A Guide for Cannabis Businesses

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Selling cannabis is easy. It’s paying dispensary employees that’s the hard part.

For the average business owner, the challenge is getting employees to show up on time and not slack off. But, thanks to the legal limitations surrounding the recently legalized Mary Jane, those in the cannabis industry face a different set of challenges.

Arguably the greatest challenge that cannabis business owners face is paying their employees legally. So, how do dispensaries pay their employees within the limitations of the law? Keep reading to find out. 

The Headache of Federal Regulations

Marijuana is legal in 33 states plus the District of Columbia; just not on the federal level. Federally, it’s still classified as a Schedule l controlled substance. Of course, cannabis business owners still have to pay federal taxes. It’s quite the paradox.

To complicate things further, payroll providers tend to avoid business owners in the cannabis industry. This is due to banking and federal regulations, which weave a complex web of limitations between the two industries. 

Banks are legally allowed to work with cannabis companies, as long as they adhere to a laundry list of regulationsFederal regulations require that banks report any suspicious activity — such as the depositing of “illegally derived money”. As logic would have it, under federal law, banks also have to file a report each time the state government deposits tax revenue paid by cannabis businesses. 

The original purpose behind these regulations was to help authorities identify criminal activity, i.e., money laundering, and to follow the money back to the source. Now banking institutions are automatically flagged for suspicious activity, adding to an already enormous amount of paperwork. There are also potential fines and criminal charges for neglecting to file a report with each “suspicious” deposit. 

How Do Dispensaries Pay Their Employees?

The limitations of cannabis banking leave business owners at a disadvantage. They are challenged to find a way to pay their taxes and produce pay stubs for their employees legally. 

Many business owners have gone the route of paying their employees by illegal means. For example, cash under the table, product trade-out or payment under the pretense of contract employment. By doing so, they run the risk of facing significant fines by their state’s labor board. This can cause them to financially implode. Especially if they’re ordered to pay back taxes owed by each of their employees.  

So, how do dispensaries pay their employees? They either find the right banking solution, or they hire a Human Resources team.

Banking service companies act as an alternative banking system. They’re there for businesses that need to transfer and store large amounts of cash. They’ll handle most of your banking needs. They’ll also take care of the necessary audits to avoid criminal suspicion. 

A cannabis HR team can handle the day to day operations of the business. This includes banking, policies, employee management, benefits, payroll, banking. They’ll also keep the business compliant, reducing IRS and labor law liability.

The Future is Green

For now, the cannabis industry hangs in the balance of federal regulations and scrutiny. Pretty soon, however, the question of how do dispensaries pay their employees will be a thing of the past, as cannabis laws evolve.

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